Retail giants Amazon, Walmart to invest more than Rs 2,000 crore in India

Amazon India functions as an online platform that puts buyers and sellers together.MUMBAI: Two of the world’s largest retailers, Walmart Stores Inc and Amazon, will invest more than Rs 2,000 crore to build their networks and gain a share of the Indian retail market that’s expected to cross $1 trillion by 2020.

While the US giants are dominant rivals on their home turf, they don’t compete head to head in India and are focusing on building scale through deep discounting. India’s rules on overseas investment in retail mean that they address what are ostensibly different areas of the market. Amazon India functions as an online platform that puts buyers and sellers together. Walmart’s stores in India cater to the wholesale trade, with smaller retailers being its customers.

Amazon will inject Rs 1,696 crore through a rights issue into Amazon Seller Services, making it the biggest infusion of capital since entering the country three years ago. The board resolution to this effect was filed with the Registrar of Companies on Thursday. The investment takes Amazon’s total investment in Amazon Seller Services in the past year to aboutRs 4,800 crore.

Walmart Stores will invest Rs 360 crore, it said in an RoC filing on Wednesday. It plans to open nearly 50 doors in India at a time when it plans to close nearly 270 stores globally.

"India is one of the last few highgrowth markets," said Kumar Rajagopalan, CEO, Retailers Association of India (RAI). "Modern retail remains untapped with just a 10 per cent share. Online companies see the potential of reaching more than 400 cities with a click. All the indicators from a political standpoint also show that India is reaching a stage of high-level liberation even at state level." RAI expects the total market size to exceed $1 trillion in four years from $600 billion now.

India’s ecommerce market is expected to grow to $103 billion by FY20 from $26 billion, according to Goldman Sachs. Amazon expects India to overtake Japan, Germany and the UK to become its largest overseas market, besides becoming the quickest to reach $10 billion in gross merchandise value in the company’s history, Diego Piacentini, senior vice-president for international business, had told ET in October last year. ET reported in July last year that Amazon may invest about $5 billion in India, up from $2 billion pledged previously by chief executive officer Jeff Bezos. Rivals Flipkart and Snapdeal have meanwhile raised funding from overseas investors as they seek to strengthen their own positions.

Amazon India said a month ago that its ecommerce site had emerged as the largest in the country, with over 40 million products offered and nearly 55,000 new products added each day. In the past year, the Seattle-headquartered company has expanded the capacity of its centres threefold, with nearly 90 per cent of its sellers using the company’s logistics.

While Amazon has already grabbed a substantial chunk of the Indian ecommerce segment, Walmart is still building its ecosystem to attract lakhs of small retail stores as customers.

"The latest equity infusion is to fund working capital and capex requirements of our growing business in India. As a wholesale cashand-carry business, we work with and develop local suppliers and create local beneficiaries along the supply chain," said Rajneesh Kumar, vice-president of Walmart India, which allotted shares worthRs 1,193 crore to its Bentonville-based parent company in September last year.

Walmart India posted its first ever sales decline last year toRs 2,992.7 crore after parting ways with Bharti Retail and halting store expansion. However, it now plans an expansion spree to reach a total store count of 70 in the next five years from 21 now. Last week, it said it would open 15 more cashand-carry stores in Andhra Pradesh apart from setting up a centre for sourcing agriculture products from small and marginal farmers.